Navigating Sales Spikes With Purchase Order Financing

​Sales spikes are something many businesses face—from startups to legacy businesses—but the less cash you have to work with, the harder it will be to face a dramatic increase in sales. Some companies make most of their money during these short but profitable seasons, so how can you take advantage of sales spikes when you have limited cash on hand?
 
This is where purchase order financing comes in.
 
What is purchase order financing?
Purchase order financing is short-term financing that can help your business pay for the inventory needed to fulfill incoming customer orders. In purchase order financing, a business receives an order from a customer, determines the costs, and applies for purchase order financing. If the business is approved, the purchase order financing company will pay the supplier for the order (or a percentage of the order, depending on the agreement), and the business will send an invoice to the customer and the purchase order financing company. The customer will pay the purchase order financing company, who will deduct their fees and then send the business the remainder of the funds.
 
Purchase order financing is helpful for businesses who want to:

• Expand their customer base.
• Improve their cash flow.
• Take advantage of seasonal spikes in sales.
• Grow their business.

 
How purchase order financing helps with sale spikes
Sale spikes are fairly predictable throughout the year as holidays and changes in the weather are closely related to consumers’ buying patterns. However, having enough working capital to meet the larger purchase orders is less predictable.
 
Back-to-school shopping creates an annual spike in sales as families purchase the necessary clothing and school supplies for their children’s upcoming school year. For example, a business that sells backpacks and lunch bags to retailers could face more incoming orders than they have the working capital to pay their suppliers for.
 
Instead of missing out on increased profits, the business can apply to a purchase order financing company, which will assess the deal largely based on the buyer’s credit (which is very helpful for newer startups that lack financial history). Since the purchase order financing company is providing the funds upfront to pay the suppliers, the business can fulfill more backpack and lunch bag orders more rapidly than with their working capital, taking advantage of the sale spike and building a great track record with their customers. Since purchase order financing is short-term, businesses can meet their financial needs without having to incur debt or enter a long-term partnership.
 
Look for the right purchase order financing company
When looking for a purchase order financing company, business owners want to look for a company that:

●Is attentive to detail. A purchase order financing company will handle transactions and communication with a business’s suppliers and customers, so look for someone who will do it well and not overlook important details or information that create frustration and poor customer experience.

●   Has a high rate of success among customers. Business owners don’t just want financing; they want to work with a partner who is invested in the success of their business and will foster trust and good communication. Look for a purchase order financing company that is well respected and positively reviewed by customers.\

●   Is efficient. The more quickly and smoothly sales go, the more profit a business can make and the more customers it can satisfy, which is particularly important during a sales spike.
 
Having less free capital to meet sales spikes does not need to keep your business from taking advantage of extra profits if you partner with a purchase order financing company to fulfill additional orders.
 
Looking for a purchase order financing company for your business? We can help. Prairie Business Credit is a national working capital provider to young, growing, or recovering businesses. We offer accounts receivable financing, purchase order financing, and equipment financing. Our company serves both as a trusted financial resource and consultant to entrepreneurs dedicated to building their businesses and ensuring their success.
 ​